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Sakmongkol ak 47

Wednesday 17 March 2010

Towards a high income economy.

You can't avoid this. The high income economy is predicated upon a knowledge-based economy. India has emerged from the status of a basket case because it producers engineers, technicians by the thousand per year. It has so many engineers per given population. So many doctors per given population.

The question then is: Has the government thought about that enabling infrastructure that will propel this country into a high income country? Define at what level of GDP? What level of manpower achievements? How many doctors per given population; how many engineers/population. Etc.

Think of how many people we want to train at PhD levels in the sciences and engineering. That's the cutting edge. Not too long ago, the then minister of higher education I think- Khalid Nordin was saying we are going to produce many at doctorate levels? Would be interesting to see in what fields. It's the quality that counts.

India produces some 500,000 technical graduates a year. Even if 30% of them are of quality material, that's still a sizeable number. Malay students must be encouraged to excel in the hard sciences.

With our current GDP, at which level are we at? We are hardly above the low income level. Between the slightly above low income level to that utopian undefined high income, exists a large void? What do you fill hat up with? You need a middle income level.

Now, that's a tricky part. You have a middle income trap; we have a corresponding middle class trap. The middle class trap with a rent seeking mentality that isn't about to give up its pleasurable position when the PM wants to open up the economy.

Why should they? You have created an environment where this middle class rent seekers are comfortable, get pink forms (most wantonly during Anwar Ibrahim's tenure as finance minister) ,Nob-hilling and hobnobbing with fat aristocrats,- would they want to give up these perks? They want the good life- but it is the good life given to them on the backs of others is that lifestyle they want to keep.

The inception a middle class for the Malays was fine but it becomes a new problem- the emergence of a rent seeking class then created by policies that must be self perpetuating. It is the rent seeking class that will sprint into action when it sees its interests being threatened.

This rent seeking class at present has as its chief spokesman and justifier, people like Ibrahim Ali and the officiously and artificially minted professors and academicians paraded by the rent seekers as their intellectual paratroopers. Hence the people of MPM and Perkasa proudly lists down their academic sharpshooters who, it is claimed can dismantle much of what have been recommended by PM Najib's much touted foreign advisers.

So what happens when we create this middle class rent seekers? It first of all widens the income gap between the middle class rent seekers with the rest within that particular community.
The rate of wealth accumulation of the elites is faster and more compounding than that for the masses whose earnings will be eroded by inflation and other factors which naturally arise from an economy artificially propped by such policies.

I wasted no time and asked the Oracle his thoughts on the PM saying he will announce the NEM in 2 stages. I asked the Oracle, what he thinks of this portioning of the announcement.

The government is testing the waters. Allowing it some escape exit to make adjustments. They called it taking time off to get feedback from the people. They should have gotten feed back before, not after the reports are completed. Having spend a large amount of money on acquiring an economic blueprint, the government isn't about to allow the report to collect dust. But that is not good. You are sending wrong smoke signals. Your plan has some inherent defects.

The main problem we are facing now is a crisis of confidence. Our people have low confidence in the government managing the state.

Was the PM spooked by Ibrahim Ali and his people?

Not really, but it did force the PM to rethink.

Maybe the PM is a victim of faulty and half baked advice. We don't know who is advisors are. Who recommended the economic advisers?

Here is a general perception. PM is handicapped by his advisors. There are reports which get louder everyday- that PM's office with people who are more adroit at their golf games than giving proper advice to the PM. Second, these people are not just up to the mark. When you are insecure, beholden- you hold back. You become compliant, submissive by nature and serve to merely nod in agreement at whatever the PM says. You are just sycophantic cheerleaders.

The PM must have a good leadership team. This requires good people. Not necessarily agreeable but uncompromising in their assessments until proven wrong. This is the leadership culture that is needed. These qualities don't necessarily go hand in hand with personal loyalty. Good leadership material is loyal to ideas, defend and expound then. This is what the PM needs at the moment. Personal loyalties can be rewarded by other means. In ancient times, the King will confer titles and give lands to his loyal supporters and then 'release' them to be on their own only to come to the aid of the king when he is in trouble.


Anonymous,  17 March 2010 at 11:03  

Consider Tenaga...

Accounting can effectively control cost,set up structures and organisation etc..its the low hanging fruits and safe route to improving profitability.Nothing really innovative except for asking for tarif revisions every year.

Engineering can look at detailed processes,invest in equipment to get better yields,optimise fuel mix etc etc..its more detailed and arduous and fraught with failures.More risks but the rewards can be truly major.

Would an Accounting based CEO take such risks?Would an Accounting CEO risk his neck to support the ideas of an Engineer?

Theoretically there are numerous processes set up within an organisation to encourage innovation n value optimisations.But,cos its drafted by accountants it presumes that Engineering is a science i.e there is only one answer to every engineering issue.

Thus,Tenaga have over the last ten years made very little technical progress.

And the same goes for TM,SD , UEM etc...

YTL,Gamuda,the big oil companies are led by an Engineers.

If Msia is serious about HIM let the right ppl with the right knowledge and training run the big corporations.
As it is the cashier is creating the recipe for the chef.

Anonymous,  17 March 2010 at 12:14  

Kebanyakan program sedia ada memang bagus, masalahnya bukan program tapi pelaksanaan yang kucar-kacir dan membebankan rakyat. sepatutnya ditolak ketepi, contoh terbaru petrol. Subsidi just for rakyat. Ok pasai apa nak tambah detector cap jari di stesen petrol? Apsal tak suruh pegi balai polis buat kad yang let say valid for 3 month with a credit katakan RM600.Bagi duit dan kad tu pada operator stesen, kalau isi rm30, ok dapat extra rm3 masuk, so kad dah tinggal rm597. Semua orang yang ada myKad dapat. Besarkan la beside petrol, naik public transport pun dapat harga subsidi, mean whatever transport system yang dapat scan banyak, they get company subsidy from petrol supplier. kalau kurang yang guna, kurang la company petrol subsidy. They get from rakyat yang gunakan transport depa.
Jangan dok mengarut la nak pasang scanner kat stesen minyak. Beside bila pi balai nak buat scan baru, anything wrong regarding that person, polis dah boleh advice "oh hang ada saman ekoq" fine.. tak boleh lari dah, kata tak dapat surat mahkamah la, surat polis la.
Tak payah dok buang duit bagi CON sultant yang tah apa2 kebenda tah.
Tapi aku tak fikir la diorang nak buat camtu... nanti tak kenyang la badut2 politik tuh...

.... adioss...

walla 17 March 2010 at 12:54  

A: 'They're probably using the term high-income in a non-technical way, otherwise how can we get from per capita GNI of USD3,300 at present to USD12,000, almost fourfold, in order to qualify as a high-income economy?'

B: 'I sense that too. Nevertheless, we must proceed. They must have felt the nation needs to be galvanized into confidence and activity, hope and aspirations. New generations are coming on-board and they will be the ones to push ahead. That's why a general target is put up consistent with the past 2020 vision but redraped.'

A: 'Tun, the only way is to avoid the inanities and insanities of the past. To continue using the same half-baked methods will be disastrous. We have to unmask all the mistakes made in the past three decades. We have lost not only time but our high ground and first-mover advantage of the past. Other countries have sprinted from behind and are now ahead. No assumptions must be held sacred. We have to bite the bullet, admit our miscalculations, understand where we have become irrelevant, and brave the future now.'

B:'And broadly we have to realize a couple of things.

One, no short-cuts. In the past we let bubbles form in the bourse and then became overconfident because we took high share prices to reflect our relevance. Share plays are just asset relocation not value-creation. If we look at global business history, what goes around comes around. Those who stay focused on building real value will continue to quietly sustain their development and wealth more steadily than those who loudly play poker with their own futures. And there are fundamentals which must be achieved in order to realize real value. We must return to the pragmatism of value creation. We need to stay focused on real fundamentals and not delude ourselves anymore with wishy-washy spin.

Two, we must not only try to be high income by adding value in order to qualify for higher prices for our goods and services in a fiercely competing global market. We must also try to achieve lower cost in how we mobilize and process our operations so that lower operating costs will also increase profit and attract investments. That means honest and hard work, focus on efficiency, productivity and integrity, and creatively using better brains and more technology to achieve faster and more relevant response, sharper precision and higher output quality.

Three, we need to overhaul our mindsets. It is the human mindset and how it is perceived by policy-makers which will determine the directions shaped in response by them based on their understanding of the populace. We have to put our own house in order now because time is no longer on our side.

The general populace must be reeducated to think more modern-wise and not instead be used as the yardstick to draft unsustainable policies.

For too long, we have let our national direction be driven by those with parochial mindsets who could only see the national reality from their own limited and sub-developed viewpoint when what is to be national must only be seen from a global viewpoint. That is because the global stage levels everything down to the fundamental of highest value at lowest price of the most relevant demand met with the most efficient supply.

We don't have time for sentimentality anymore. What works and what is relevant to the world are what we must have and command.

walla 17 March 2010 at 12:54  


We need a healthy, growing, fertile and powerful base of research, development and innovation in order to identify new areas of specialization, product extension, corporate direction and national thrust. We need it to actualize ideas and build a big-ideas entrepreneur base. We need it to engage and lure high-value investors to park themselves here so that more collaboration can be done. We need them to set up their operational headquarters and logistics hubs, human resource centers and skunkwork labs. But to get to these, we need to honestly re-evaluate and re-engineer our entire education system from young to adult including expertise from the older ones and retirees in the private sector.

Eleventh, we have to work out our culture dilemma. Culture is not a static thing. It changes with society. Society changes by inflow and outflow of ideas, icons, norms and lifestyles. Just because something appears alien to us today and contrary to our belief system of the day doesn't mean it cannot be performing something that defuses the situation from going down from something else we choose not to be seeing.

If we are to be a high-income economy, we must also have a highly rationalized society. Study the high income economies of the world and see how the central cohort of their people behave and how they think about issues and how they form their opinions. Cumbersome behavior aside, they in the main will argue something until it reaches a metastable rational state based on facts, fairness and a forward-looking framework.

And only in this type of framework can information and knowledge intensity operate. If we at this moment do not have that, we must not exclude the possibility that we have to create a dual-track brain-shaping state. By that i mean three or more media of instruction for our educational system. I am not going to prolong the agony anymore and will stop discussion of that right here. It has already been debated to oblivion. The minister should open his mind instead and fight his own gremlins.

Twelve, we must spring-clean everything. The way we run local councils, the way urban places are maintained, the way we haven't been proactive about what can go wrong, the way we do things like security, health, social amenities.. the entire works inch by inch area by area.

One of the basic matters about such things is the principle of closing the loop. How often have we seen people saying it's not their responsibility when they are the only people standing there? They must proactively show initiative and take up the matter without fear, doing their best to close the loop on the problem in the absence of others. The buck stops at each and everyone.

Furthermore, living in fear of this or that with minds limited by fear of breaking this or that rule that has been unquestioningly imbibed without pre-qualification is regression not progression. Those who push such states of mind should apply the rules to themselves first to see if they work to help lift up their own families.

Thirteen, import substitution is not a panacea for national development. A monitored but self-compensating open economy is the way to energize and innovate new ways of doing old things and to extend the spectrum of innovation beyond just products and services into the domains of innovating brands, business models and brain-building.

We should not just be the most fun-filled place on earth, but also the most electrifying place to do business and build industries at the start of this new millennium.'

A: 'But how will all these quadruple our per capita GNI, Tun?'

B: 'We need to do all of them at the same time, not staggered, not phasal. And then pray hard, Sofea. We have no other choice. Our country is hollowing out. We must save this nation for the young ones. We owe them to clean up the mess.'

(btw: En Umar, sorry i cannot make it smaller; too many different points)


walla 17 March 2010 at 12:54  


Eighth, we must refocus on our strengths and our capabilities. Because global situations change, the time may be opportune now to revisit some of our past strengths which have been left to fallow. If we are good in agriculture for instance, and there is a big world market for agro-fertilizers, we can invest in new R&D to develop alternative fertilizers for export to countries which are too poor to afford branded ones. If we have tremendous biodiversity, we must analyze what are holding back our ability to develop a really profitable bio-industry. If it is because we don't have enough brains, then find them from anywhere in the world and get them any which way. Agro-transformation will also benefit the rural folks and help them achieve higher incomes.

We must realize we have been living in a dream. We depend on low-loyalty multinationals to use our labor for low-value assemblies. We depend on oil and gas to run our disproportionately sized civil service and to prime the private sector at increasingly toxic levels of debt. We depend on plantations with fluctuating incomes and foreign workers to fill the gaps in the rural areas with little wealth flow into the urban poor areas and even less motivation to upgrade and modernize productive assets. And we cover the situation up when we underpeg the minimum wage level that defines hardcore poverty. To embrace high-income strategy, we need to get out of this self-wounding comfort zone. Which comes to the next cores...

Nine, quality human capital is the common key to all high income economies. By the latter, i don't mean those enjoying their temporary resource curse which may initially occasion conspicuous spending but later cycle back punitive billing. I mean earnest, honest, progressive and hardworking manpower. To get that manpower, our brain shapers or training institutions must be the best. Which means the trainers and planners must be the best. If they are only one step ahead of their students, then they are below the line of global standards. High standard trainers and brain shapers are needed the most in our misaligned educational system. Secondly, we must prioritize meritocracy again. We were once the best brains in the old commonwealth. And for someone in particular to take note, the commonwealth is not common wealth only because you chose to ignore that brains of all miens are the real wealth of the nation. A nation is great or mediocre by the measure of how it builds and generates its brains.

There is a global war for talent at the moment. Who wins it has the defining advantage.

What can be hoped is that those who have been trained by the best in the world and who have seen the real world beyond our shores will proactively protect what is pragmatic, anchor what is reasonable, drive what is real, and push for modernization and fairness in this nation. If they don't, this country will sink into mediocrity because output comes from input.

Tenth, we need to get real on economic linkages and institutional integrity. If R&D is not done in the private sector or by our SME backbone because they don't have the right people or incentives, surmount such limitations any which way. If our incentives and grants schemes are complicated, liberate them intelligently. If our operational linkages between public and private sectors are wrought with constraints, bureaucracy, inefficiency and rent-seeking activities, clean up the mess with definitive power.

walla 17 March 2010 at 12:54  


Four, we must always see things from the customer's point of view. By customer, i don't mean just the buyer or user but also the citizens and people of a progressive and modernizing world. If we adopt practices which cause general and generic dismay which result in crimping people from embracing a wider and healthier worldview about everything, then we will be regressing from what are needed to build a more confident ecosystem, social inasmuch business, in which our national policies are to thrive and harmony instilled for faster progress.

Five, we need an economic ecosystem which is more information and knowledge intensive and more imbued with confidence that we can overcome challenges using our brains and not our emotions alone.

Six, we must each and everyone be maximally efficient. I said no short-cuts earlier and not without reason. Applied to individuals, it means we must value experience more. Not just by thinking but also by doing. However, there is a caveat. The high-income generator is an intelligent being. He or she will do something with maximum efficiency after deciding that it is relevant. Which often means doing it fast which means doing it in the least number of steps. It also means smooth motor (manual) skills, efficient communication, staying focused and alert, and seeing the big picture all the time while keeping balance with the sensitivity of people which thus falls back to the ability to read people and situations accurately. As an example, spending too much time waffling too much courtesy to a foreigner who only wants something done fast can be counterproductive in the final result, for relevance in the world these days is mostly all about results. It is a result-focused world which thus measures all performances by results.

Seventh, we must manage our expectations better. Those who are economically-challenged must realize assistance is to get them up again so that they can manage their own lives better and not cause them to be easy-going while depending on more aid and crutches. External dependency diminishes value which ends up being unfair to others who have just fallen into the same plight to whom aid cannot be provided because it has been expended. One must constantly strive to be economically independent and take pride in achieving that. Aid and support can only do so much beyond which state paralysis will happen to the detriment of the whole society. It thus follows that one must be careful of what one has which is to be distributed. Which means there has to be better focus on quality and not quantity household sizes. After all, fixed amount for more means less per capita and there is a threshold level for everything before it can change and improve.

Likewise, expectations can be managed in other aspects. Everyone wants to be a CEO immediately and get the perks and power which come with the position. But there can only be one CEO per firm. So organizations must be lean and individuals must manage their own expectations more efficiently. If what is opened is say only a lower rung position, it doesn't mean there is a trade-off. The pay may be lower but the pressure is less and the time available to pick up new skills more. That is an avenue to invest in the future which can be built even more strongly for having higher skills instilled more stably now. By that time, higher positions may pay even better than now. Especially when a higher income economy has been so created.

Anonymous,  17 March 2010 at 14:01  

But you have forgotten about the IPP anchor hanging on Tenaga's neck, courtesy of TDM.

With fixed prices like they are getting, what incentive is there for them to improve ?

Anonymous,  17 March 2010 at 16:17  

And Nazri said the NEM is NEP and other things. There is no hope.

Anonymous,  17 March 2010 at 19:39  

17 March 2010 14:01

IPP is a convenient excuse...
There are so many ways to improve..TNB own generation is as costly (over 21 years lifespan) then the IPPs.Its the way they're looking at numbers...
And cos govt subsidizes gas/diesel the whole scenario is balanced towards maximising the subsidies.Nobody is looking more then 3 years ahead..nobody does term projections and looking at lifecycle.

Thus new tech is not considered (to get more energy out of the fuels) cos capex hits bottomlines whereas continuing subsidies don't.

If we are going HIM let technocrats with the bigger dynamics run critical services and GLCs.Then we will benefit more in depth knowhow and innovative mindsets.

The days of the destructive,over paid bean counters must definitely end NOW.Nothing have been achieved over last ten years except for lots of PR noises and paper shuffling.We can't afford tp lose another 10 years???

PANJI HITAM 61 20 March 2010 at 22:49  

I totally agree with anon 11:03.

It is not that the Malays cannot lead, it is just that the right Malays are not leading... but things are changing and Sak is one fine example.

More to come.

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